LATE ITEM AGENDA

Strategic and General Services Committee

Wednesday, 20 August 2014, 6.00 pm

City of Fremantle

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TABLE OF CONTENTS

SUBJECT PAGE

SGS1408-16 NOTICE OF MOTION – CR DOUG THOMPSON – HEALTH OF

THE SWAN CANNING RIVER SYSTEM 3

SGS1408-17 KINGS SQUARE REDEVELOPMENT – APPOINTMENT OF ARCHITECT AND ACCEPTANCE OF ARCHITECT FEE PROPOSAL 5

SGS1408-18 7 QUARRY STREET - NRAS CREDIT WITHDRAWAL 9

LATE ITEM AGENDA ATTACHMENTS 1

SGS1408-16 NOTICE OF MOTION – CR DOUG THOMPSON – HEALTH OF THE SWAN CANNING RIVER SYSTEM 1

SGS1408-17 KINGS SQUARE REDEVELOPMENT – APPOINTMENT OF ARCHITECT AND ACCEPTANCE OF ARCHITECT FEE PROPOSAL 3

City of Fremantle

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SGS1408-16 NOTICE OF MOTION – CR DOUG THOMPSON – HEALTH OF THE

SWAN CANNING RIVER SYSTEM DataWorks Reference: Nil Disclosure of Interest: Nil Meeting Date: 20 August 2014 Previous Item: Nil Responsible Officer: Glen Dougall, Director Corporate Services Actioning Officer: Glen Dougall, Director Corporate Services Decision Making Authority: Council Agenda Attachments: Summary document – Our Heritage and our future; Health

of the Swan Canning River System ELECTED MEMBER SUMMARY The Auditor General has released its report into the performance of the Trust. The link to the summary document is here and presented as attachment 1- https://audit.wa.gov.au/wp-content/uploads/2014/08/insert2014_16-SwanRiver.pdf The full report is here:- https://audit.wa.gov.au/wp-content/uploads/2014/08/report2014_16-SwanRiver.pdf The full report strongly reinforces many of the key comments and recommendations of WALGA’s Priority Plan for Investment in the Swan Canning Catchment. A number of the agency responses to the findings identified one recommendation of the Priority Plan - for an urban drainage partnership agreement - as a key recent development in improving the outcomes we all desire. The report provides a platform for the Association and the local governments to strongly advocate the recommendations in the report to be taken up of by Government. It would also be useful to get WALGA ‘s priority action plan reinvigorated again. Fremantle should raise the issue at the next Zone meeting so that the Zone can put up an appropriate motion to WALGA for continued action on this matter. Given that the reform process may also bring greater areas of the Swan River foreshore into our control it would also be useful for Fremantle to consider what action it could take to work towards some of the objectives outlined in WALGA’s Priority Plan for Investment in the Swan Canning Catchment. VOTING AND OTHER SPECIAL REQUIREMENTS Simple majority required

City of Fremantle

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NOTICE OF MOTION 1. Fremantle Zone members raise the issue at the next Zone Meeting with a

recommendation for WALGA to reform the Swan Canning Catchment Policy Forum.

2. A report be brought to WALGA on what actions Fremantle could take in relation to control of urban drainage discharges into the Swan River.

OFFICER COMMENT Nil

City of Fremantle

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SGS1408-17 KINGS SQUARE REDEVELOPMENT – APPOINTMENT OF

ARCHITECT AND ACCEPTANCE OF ARCHITECT FEE PROPOSAL DataWorks Reference: 203/023 Disclosure of Interest: Nil Meeting Date: 20 August 2014 Previous Item: PSC1302/27 Responsible Officer: Graeme Mackenzie, Chief Executive Officer Actioning Officer: Graeme Mackenzie, Chief Executive Officer Decision Making Authority: Council Agenda Attachments: Letter from Sirona Capital EXECUTIVE SUMMARY

Council entered into a contractual agreement with Sirona Capital in 2013 for the redevelopment of properties in the Kings Square precinct. Part of that redevelopment includes the Council Civic and Administration building. To ensure the best possible outcome for this aspect the City conducted an international architectural design competition from which Kerry Hill Architects (KHA) were selected by the independent expert judges. Subsequent to the selection of KHA, City officers have been working with both KHA and Sirona to develop the process for this redevelopment including refining the costs. The competition was designed to find architects that could design a high quality building for the City, but whilst seeking an indication of fees from entrants the competition did not give any consideration to fees as part of the judging process. Therefore, officers have sought a formal fee proposal from KHA which now needs to be considered and accepted by Council. The international competition meets the requirements of the Local Government Tender regulations so there is no requirement for a further competitive process, unless the Council does not accept this fee proposal. The proposal has been reviewed by Sirona, acting as the City’s Project Manager in accordance with the Kings Square contract. Sirona has provided written advice that they are satisfied “… that KHA has assembled a strong and well credentialed team of experts that are both competent and experienced” and “… believe the fee agreed is both competitive and appropriate” and recommends the City accept the appointment of KHA and its team of sub-consultants, including agreeing to the proposed fee structure. Accordingly this report seeks to appoint KHA for this project and accept the fee proposal as detailed in this report. BACKGROUND

The City, following a rigorous business planning process, entered into a contractual agreement with Sirona Capital for an integrated redevelopment of properties in the Kings

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Square precinct. Those properties are Myer building, Queensgate, Queensgate Car park, Spicer site, and the City Civic and Administration building. The Council sees this project as a catalytic project for the city and as such wanted to ensure the highest possible design and development outcomes. Since its own Civic and Administration building is part of the redevelopment of the precinct and the City’s responsibility, the Council agreed to conduct an international architectural design competition. Following an exhaustive process KHA was selected as the winner of that competition late last year. The purpose of the competition was to appoint the most experienced and qualified architects that could deliver the Council’s vision for its building. What the competition did not do was set up a competitive process that gave any weighting to the architectural fees. Therefore, subsequent to the announcement of the winner of the competition, city officers and the project manager, Sirona Capital, have been working with KHA to refine the project brief and develop a fee proposal acceptable to the City. COMMENT The KHA fee proposal is split into two stages. The way the Kings Square agreement is set up requires this approach. Councillors will recall that the City is required to commence construction of its building within 6 months of Sirona reaching certain milestones of construction of the Queensgate building. In order to meet this requirement it is necessary for the planning and design to be completed to a development approval stage as soon as practicable. It is also considered prudent to have the development approval in place prior to the expiration of this term of council. The proposal from KHA acknowledges that stage 2 may not proceed as it is dependent on Sirona proceeding with the purchase and redevelopment of council properties through the Kings Square contract. The fee proposed for the project is 8.5% of the contracted construction cost, to be shared 5.0% to KHA and 3.5% to the sub consultant team. This fee is consistent with industry standards which usually range between 7.5% and 10.0% depending on the complexity of the project. Given this project is a civic project that needs to be integrated and timed with a third party development the fee is seen as fair and reasonable. It is also favourable for the City when benchmarked against a recent project undertaken by KHA for the City of Perth Library. Having established that the overall project fee is fair and reasonable, the City then sought a breakdown of fees into the two stages from KHA. The proposed fee for stage 1 is $585,230, net of GST which includes the sub consultant team fees. The actual stage 2 fees will be determined once construction contract costs are established through competitive processes. The scope of the design for the civic and administration facility includes both Newman Court and the High Street Road reserve, but does not include the balance of the square owned by the Anglican Church. Officers believe this should be included as part of the project to ensure a totally integrated public realm. To include this and consider any further expansion of the scope will require a further procurement process. To progress this, a report will be presented to the next Special Projects Committee meeting.

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RISK AND OTHER IMPLICATIONS

Financial There is a risk that the Kings Square project may not proceed, although to date Sirona have met their requirements and are still working collaboratively with the state government to secure a major commercial tenant to underpin the project. If the project does not proceed the council will have expended the $585,230 to secure a development approval. Council has budgeted $500,000 in the 2014/15 budget for this work to be undertaken. The fee proposed for stage 1 is $585,230 which is above budget and will need to be considered during budget review. Legal As outlined in this report, the City is required by the Kings Square contract to redevelop its building once Sirona reach its construction milestones for the Queensgate building. In order to do this, the City will need to be “DA ready” so officers believe the Council needs to agree to proceed with the KHA appointment and agree to the fee proposal. Operational Developing the design and the development application for a new civic and administration centre will have minimal impact on the operations of the City, although various officers and the elected members will be required to have input into the design process. Organisational Nil CONCLUSION

In order to meet its legal requirements under contract with Sirona Capital, the City will need to have a development approval for its civic and administrative building. Once Sirona commences redevelopment of Queensgate, there will still be a significant lead time in preparing documentation, letting construction contracts etc before actual construction can commence. KHA won the council’s architectural design competition and the fees proposed for the project are fair and reasonable. Council has budgeted $500,000 in the current financial year for this work and, although the fee proposal is higher, it is recommended that Council formally appoint KHA and accept the fee proposal for this project. STRATEGIC AND POLICY IMPLICATIONS

As outlined in the report PRECINCTS AND OTHER COMMITTEES RECOMMENDATIONS PLUS OTHER CONSULTATION

Nil

City of Fremantle

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VOTING AND OTHER SPECIAL REQUIREMENTS

Absolute Majority Required OFFICER'S RECOMMENDATION

That Council:

1. appoints Kerry Hill Architects (KHA) as the City’s architects for the redevelopment of the civic and administration building as part of the Kings Square redevelopment project;

2. accepts the fee proposal for stages 1 and 2 of the project from KHA, as outlined in this report, of 8.5% total cost based on final construction costs; and

3. accepts the fee for stage 1 of the project to achieve a development approval, included in the total cost, of $585,230.

City of Fremantle

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SGS1408-18 7 QUARRY STREET - NRAS CREDIT WITHDRAWAL DataWorks Reference: 049/004 Disclosure of Interest: Nil. Meeting Date: SGS 20 August, 2014, Council 27 August, 2014 Previous Item: SGS1312-4; SGS1401-2; SGS1403-12 Responsible Officer: Glen Dougall, Director Corporate Services Actioning Officer: Nadine Weller, Property Coordinator Decision Making Authority: Council Agenda Attachments: Legal Advice – Jackson MacDonald (confidential) EXECUTIVE SUMMARY To consider the implications for the sale of 7 Quarry Street resulting from National Rental Affordability Scheme (NRAS) Credits not being available to Fremantle Park Investments. BACKGROUND In March 2014 Council adopted a business plan proposed under section 3.59 of the Local Government Act 1995 to enter into the sale of 7 Quarry Street, Fremantle, to FPI based on the provision of 25 NRAS credits being provided on the site. On the basis of this business plan, council delegated authority for the Chief Executive Officer to negotiate the transaction and development of the property. COMMENT Since the adoption of the Plan the City and FPI have been finalising the details of the agreement. The completed agreement sought that 25 NRAS credits be applied to the development. At that point FPI advised they could not sign the agreement as the commonwealth government had withdrawn the NRAS program and that they were unable to achieve the development with NRAS credits. It is considered that a development of the property without NRAS credits benefits would significantly alter the proposal provided and adopted in the Plan of March, 2014. As a consequence officers are not able to enter into a contractual arrangement which will comply with the intent of the Plan. On 10th June, 2014, the City formally advised FPI it was unable to continue with the agreement due to NRAS credits not being available. It is noted the NRAS credit program has been withdrawn for reasons outside the control of FPI. There are several options which may be considered at this point. Not proceed with the arrangement As the intent of the Plan can no longer be undertaken it is considered the arrangement is unable to proceed. At this point Council may conclude that as a consequence of not acquiring NRAS credits the Plan as adopted would need to be modified significantly and therefore is not in a position to proceed with the Plan. Whilst the Council had approved the Plan and delegated to the Chief Executive Officer to enter into an agreement, the agreement has not been entered into and advertising under section 3.58 of the Local Government Act 1995 has not occurred.

City of Fremantle

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This option may be premature in that FPI have not been provided with an opportunity to deliver an equivalent outcome to the original proposal and could place an argument forward on the merits of such. Advertise for 7 Quarry Street on the open market If council were to decide not to proceed with the arrangement it is then open to consider the sale of 7 Quarry Street on the open market. Council could consider a conditional sale process where offers are sought on the open market based on certain development outcomes. This could be similar to the sale of 50 Pakenham Street where a certain level of affordable housing was sought as part of the development outcome. This would have been the path recommended to council if FPI had not approached council with NRAS credits. Again, this option may be premature in that FPI have not been provided an opportunity to deliver an equivalent outcome. Allow FPI time to develop a proposal with similar outcomes to the adopted Plan It is noted that the failure to attain NRAS credits is not the fault of FPI in particular, but result of a change in government and consequential changes in government policy. As the FPI development had not yet reached a position to deliver outcomes they were not in a position to claim any credits. There may be consideration to allowing FPI time to work with other bodies to achieve an outcome which is similar in the intended benefits of the original Plan adopted by council in March, 2014. Consideration may be given to allowing a reasonable period of time, three months, where FPI are able to outline a proposal to achieve similar outcomes to the satisfaction of council. At this point council could then consider whether any proposal received would achieve similar outcomes and whether it could continue to enter into a transaction, subject to the Local Government Act 1995. FPI have written to the City advising they believe there is a legal obligation for the City to proceed with the arrangement. Legal advice is attached for council information. FPI have developed a good faith proposal with council to develop 7 Quarry Street and provide affordable housing using NRAS credits. Concept plans have been provided to Council’s Design Advisory Committee but have not proceeded beyond that point where detailed plans have been provided. RISK AND OTHER IMPLICATIONS Financial The sale of the property forms part of the 2014/15 adopted budget. Legal The City has formally advised FPI that it believes it is unable to continue the agreement without NAS credits as the original proposal and development intent can no longer be satisfied. FPI, through their solicitors, are challenging this opinion. At this point in time it is

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believed Council is able to allow reasonable time for FPI to provide an equivalent proposal to council for consideration. Operational The City will continue to consider legal advice. By allowing FPI an opportunity to put forward an equivalent proposal, council will be allowing FPI the opportunity to manage the implications of not receiving NRAS credits. Organisational Nil. CONCLUSION It is acknowledged that the failure to attain NRAS credits was through circumstance and not any direct action, or inaction of FPI. It is considered appropriate to allow FPI reasonable time to deliver an equivalent proposal to council which will meet similar benefits to the original business plan for the sale of 7 Quarry Street, adopted by council in March, 2014. STRATEGIC AND POLICY IMPLICATIONS To deliver the affordable housing objective of the Strategic Plan. COMMUNITY ENGAGEMENT Community engagement was undertaken as part of the business plan. VOTING AND OTHER SPECIAL REQUIREMENTS Simple majority required OFFICER'S RECOMMENDATION 1. Council acknowledge that Fremantle Park Investments is not able to attain

NRAS credits for the proposed purchase and development of 7 Quarry Street, Fremantle,

2. a) Council allow a period of three months, to 28 November, 2014, for

Fremantle Park Investments to provide a proposal which is equivalent to the March 2014 adopted business plan for the sale of 7 Quarry Street, and

b) Any proposal received in 2a above will be considered in relation to the whether or not it is equivalent to the March 2014 business plan for the sale of 7 Quarry Street, Fremantle.

LATE ITEM AGENDA ATTACHMENTS

Strategic and General Services Committee

Wednesday, 20 August 2014, 6.00 pm

Attachments – Late Item Agenda

Strategic and General Services Committee Wednesday 20 August 2014

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SGS1408-16 NOTICE OF MOTION – CR DOUG THOMPSON – HEALTH OF THE SWAN CANNING RIVER SYSTEM

ATTACHMENT 1

Attachments – Late Item Agenda

Strategic and General Services Committee Wednesday 20 August 2014

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Attachments – Late Item Agenda

Strategic and General Services Committee Wednesday 20 August 2014

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SGS1408-17 KINGS SQUARE REDEVELOPMENT – APPOINTMENT OF ARCHITECT AND ACCEPTANCE OF ARCHITECT FEE PROPOSAL

ATTACHMENT 1